Tony Allen Senior Consultant to CEDR explains what this
means for the requirement for written signed agreements for a
binding mediated settlement.

In an article I wrote about a year ago under the title
"Oral variation of mediation agreements" I expressed
concern about the possible effect of several recent decisions on
the important standard provision in most well-drafted mediation
agreements which requires that, to be binding, settlement terms
must be in writing and signed by the parties. Those cases were
United Bank Ltd v Asif and World Online Telecom v
I-Way Ltd (both appeals from decisions about summary judgment,
but decided in opposite ways) which were reviewed fully (albeit
technically obiter1) in Globe Motors Inc v
TRW Lucas [2016] EWCA Civ 396. Although all those decisions
were about commercial contracts which had provided that any
variation of terms had to be in writing and approved by both or all
parties for them to take effect, there is an obvious parallel with
the similar provision in mediation agreements.

The reasoning in Globe Motors was adopted by the Court
of Appeal in MWB Business Exchange Centres v Rock
Advertising [2016] EWCA Civ 553, where the Court unanimously
found that parties could, as a matter of principle, always override
orally the requirements of an earlier "No Oral
Modification" (NOM) contractual term that variations could
only be effective if in signed writing. The effect of this
precedent was to make it possible for parties to agree to waive the
requirement for signed writing and seek to assert the existence of
enforceable terms after a mediation, even though only oral.

However, the Supreme Court in [2018] UKSC 24 has now
reversed the Court of Appeal's decision in MWB, ruling
that parties can bind themselves to an agreed type of formality for
any variation to be binding, and thus giving full force to the
status and enforceability of NOM clauses.

As Lord Sumption says of commercial NOM clauses in the
MWB majority judgment:

There are at least three reasons for including such clauses.
The first is that it prevents attempts to undermine written
agreements by informal means, a possibility which is open to abuse,
for example in raising defences to summary judgment. Secondly, in
circumstances where oral discussions can easily give rise to
misunderstandings and crossed purposes, it avoids disputes not just
about whether a variation was intended but also about its exact
terms. Thirdly, a measure of formality in recording variations
makes it easier for corporations to police internal rules
restricting the authority to agree them.

While these comments relate to commercial agreements, the same
reasons apply to securing certainty in mediated agreements, which,
after all are often themselves renegotiated commercial agreements.
Even when they are not, such as in injury, employment claims, trust
and inheritance, and boundary disputes, the certainty which signed
written terms should create is highly desirable. He refers to the
similar concept of "entire contract clauses" which are
intended to negate the purported effect of any prior collateral
agreement which might be alleged later. Of course, the effect of
entire contract clauses is retrospective, whereas NOM clauses
operate to protect against future uncertainties.

In a minority judgment, Lord Briggs is slower to abandon the
"freedom of contract" principle that parties can agree
orally to override the requirements of a NOM clause, but he agrees
that, to do so effectively, the parties must turn their minds to
the NOM clause and probably agree to vary its effect in writing
before amending the contract orally, something that did not happen
in MWB, hence his agreement that the appeal succeeded

How might this impact previous decisions?

What might have been the effect of this decision if it had
pre-dated the few cases where this topic has arisen in the past? My
earlier article discussed several of these, and I repeat the facts
of each with fresh commentary in the light of MWB v
Rock.

In Brown v Rice and Patel [2005] EWHC 625 (Ch), the
trial judge rejected initial submissions that, simply because there
was no signed written settlement, he was barred from considering
what happened during the mediation. He treated mediation as
"assisted without prejudice negotiation", subject to the
usual exception to privilege that if one party argued
that agreement had been reached, a judge was entitled to admit
otherwise privileged material to decide whether this was so. This
includes consideration of whether waiver or estoppel arose over the
signed writing clause, or whether a collateral contract agreeing an
oral settlement had been made to circumvent its effect. Having
heard the evidence, he found that no estoppel or waiver had
subverted the signed writing clause. He also found that no
sufficiently clear offer had been made during mediation capable of
acceptance by noon next day (as one party argued), so that no
collateral contract as to leaving an offer open could be construed.
But, he also ruled that because the offer had not been put in
writing and signed, it could not be relied on.

His finding that there was no offer capable of acceptance seems
to render his finding on the effect of the signed writing clause
obiter, since if no valid offer was ever made at all,
there was nothing to record in writing. But, at least he bestows
some significance to the signed writing clause, as a backstop, if
not as a front stop or condition precedent. The judge further found
(again obiter)that the mediation did not end before the
period alleged for any offer to be concluded, so that the signed
writing clause would still need to be satisfied in relation to the
acceptance next day, which would effectively still be within the
mediation and covered by the mediation agreement's terms.

The view that mediation is merely "assisted without
prejudice negotiation" is unlikely to stand scrutiny now, as
mediation is governed by a mediation contract with terms that
introduce terms as to confidentiality enforceable by the mediator
as well as the parties, and later cases have recognised this.
[See Cumbria Waste Management v Baines Wilson and Farm Assist v
DEFRA (No.2).] That being so, it is possible that a fresh
decision would simply decline to investigate behind the veil of
confidentiality at the mediation when no one could produce a signed
written settlement agreement.

In AB v CD [2013]EWHC 1376 (TCC) (heard on 16 April
2013 but not reported for another year), the judge found that
certain offers had been left open without a written record for a
time, but that the mediation (and the effect of the signed writing
clause) ended when the period for accepting those offers expired
about a week later. The offer and acceptance which he found led to
settlement was later than that, and hence writing was no longer
required to bind the parties. Incidentally, he took a much looser
view than was taken in Brown as to whether the accepted
offer was sufficiently complete to be accepted. There is no
suggestion that lapse of time might vitiate the effect of a NOM
clause, so this decision might be open to challenge.

In Universal Satspace v Govt of Kenya unrep QBD (heard
on 20 Dec 2013), the judge followed Brown in construing an
oral collateral contract that the parties had bound themselves
during the mediation to agreed terms and would sign it by an agreed
date, even though those terms were never written down and signed.
The claimants did not try to argue that settlement terms had simply
been agreed, because the signed writing clause would have prevented
them from binding the parties. The judge regarded the signed
writing clause as applying only to settlements: it did not catch
what he was persuaded was an agreement made orally to sign a
document on agreed terms by an agreed date. There must be
considerable doubt as to whether this decision can withstand
MWB now.

In Dow v Bombardier [2014] SCC 35 (Canada), a
global purchaser/supplier dispute went to mediation with
confidentiality provisions but with no signed writing
clause in the agreement. After the mediation, one party claimed
that the whole global dispute had been settled, whereas the other
claimed that the sum agreed covered only a Canadian tranche of the
claim, and sought to adduce evidence of what happened at the
mediation to prove it. The Supreme Court held that contractual
confidentiality could oust the right to rely on exceptions to
without prejudice privilege, but only on very clearly drawn terms
(another instance of the paramountcy of party autonomy in contract
law), and the terms of this mediation agreement were not tight
enough to do that. They, therefore, received evidence as to what
happened at the mediation. The SCC actually drew attention to the
fact that a signed writing clause was a device which might
effectively oust the exception to the without prejudice rule
allowing evidence whether agreement had been reached, thereby
anticipating that such a clause should be used to achieve certainty
after a mediation. There is no direct English authority on this
point, but the Supreme Court's decision in MWB
suggests that the Canadian view may be right.

The practical effect of MWB must be that mediators
should always remind parties of the effect of this clause and not
let them go away at the end of a mediation without a written signed
settlement agreement. Even if they have partly, conditionally or
provisionally settled terms, even by leaving an offer open for
acceptance for a set period, they must record that agreement,
however much less than global, in writing.

Footnote

[1] With apologies to non-Latinists and non-lawyers for
using a very useful word to express a more complex idea, as the
length of this footnote shows – this means that the decision
about oral variation law was not part of the reasoning required to
decide the Globe v TRW Lucas case (which was decided on
another point) so is not technically binding as a precedent, though
it is of highly persuasive significance as an opinion of the Court
of Appeal. Latin can be useful sometimes....

Originally published 20 July 2018

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